Pillar of “barnierism”, the Senate concludes this weekend the examination of the “revenue” section of the state budget for 2025 without giving in to government pressure. The Chamber of Local Authorities has reduced by more than a billion euros the effort required of them in the government budget, which initially counted on 5 billion before reviewing its copy before the departments and then the mayors.
Senators unanimously opposed the reduction of the VAT Compensation Fund (FCTVA), a system to support communities in their investment spending. The government’s initial provision, which was supposed to bring 800 million to the State, intended to review both the base and the rate of this fund, mainly targeting investments already committed in 2023 and 2024.
This is an “unjust measure because it affects all communities indiscriminately” and “hits” the “virtuous circle” of local investments, alarmed the centrist senator of Cantal Bernard Delcros. On the left, several voices were even more severe towards the system proposed by the Barnier government. “If we want local elected representatives not to stand for re-election tomorrow, let’s continue like this!” We are not very far from this”, worries the communist Cécile Cukierman (Loire).
Michel Barnier, who will probably be threatened next week by a motion of censure on the 2025 budget texts, had announced to elected officials in recent days that he was ready to partially reverse this measure, eliminating only the retroactivity. This is “more than 80% of the 800 million proposed”,insisted Public Accounts Minister Laurent Saint-Martin during the session,careful not to “burden local investments”.
The senators also approved a reform of this FCTVA to allow the funds in question to be paid in the same year as community expenses. They will have to wait two years before being compensated under the current system.
Despite intense debates and requests from all sides of the House, the Senate did not want to index the overall operating contribution (DGF), allocated to local authorities, to inflation. though, it has adopted one of the socialist amendments which plans to integrate this DGF with 290 million euros, to avoid imposing on all the territories the other two measures foreseen in the budget: the increase in the rural solidarity allocation (150 million) and the support urban solidarity fund (140 million).
#PLF2025 | Victory
✅ Adoption of my amendment on the annual indexation of the DCT thanks to a transpartisan vote in the Senate.
✅ Government guarantee to add 50 million euros to the contribution for territorial continuity (DCT) in the second part of the PLF.
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— Paul Saint Paris (@PauluParis) November 30, 2024
the Senate decided to index the territorial continuity contribution (DCT) paid to Corsica to inflation. The government has proposed a budget of 50 million euros, but only exceptionally for 2025.
How might local governments in France respond to potential budget cuts in the upcoming years?
Interview between Time.news Editor and Public Finance Expert
Editor: Good morning, and thank you for joining us today. We are here with dr.Marie Dupont, a renowned expert in public finance, to discuss the recent developments in the French Senate regarding the 2025 state budget. Dr. Dupont, could you provide some context on what “barnierism” refers to in the current political climate?
Dr. Dupont: Good morning, and thanks for having me. “Barnierism” typically refers to the policies and political ethos associated with former European negotiator Michel Barnier, notably focusing on fiscal restraint and an emphasis on local governance. In this budgetary discussion, we’re witnessing a strong reflection of those principles, especially with the Senate’s stand against the government’s proposals.
editor: Engaging! The Senate has decided to push back against the government’s original budget request,slashing over a billion euros. What does this say about the current political dynamics between local authorities and the national government?
Dr. dupont: It underscores a notable shift in how local authorities perceive their relationship with the national government. By reducing the expected contributions from local entities, the Senate signals a commitment to defending their financial independence and ensuring that essential public services can continue without overburdening local budgets.This also demonstrates a growing resilience among senators who are united in protecting local investments.
Editor: The Senators have also unanimously opposed the reduction of the VAT Compensation Fund, which was supposed to support local investments. What are the implications of this decision for the local communities?
Dr. Dupont: This decision is crucial for local governments. The VAT Compensation Fund, or FCTVA, plays a vital role in ensuring that communities can finance infrastructure and public services. By opposing cuts to this fund, the Senate sends a strong message that local investments must be prioritized, especially in challenging economic times. Without this support, we might see a deterioration in public services and infrastructure development at the local level.
Editor: Considering the initial government proposal aimed to adjust both the base and the rate of the FCTVA, what potential impact could these adjustments have had on communities if they had gone thru?
Dr. Dupont: If the government’s proposal had passed, we would likely have seen a narrowing of financial resources available to local authorities, resulting in repercussions for essential projects. Some communities rely heavily on this fund for key investments, from schools to roads to public transportation. Lowering the support would have compelled many local governments to potentially raise local taxes or cut important services, significantly impacting residents’ quality of life.
Editor: it seems like the Senate’s action might be a case of prioritizing local needs over strict central control. How might this evolving dynamic influence future budgets and governance in France?
Dr. Dupont: This trend indicates a potential shift towards a more collaborative governance model in France, where local authorities have a stronger voice in budgetary matters. If the Senate continues to assert its role as a defender of local governance, we might see greater negotiations and compromises in future budgets. this could lead to a more diversified and resilient fiscal policy that considers the unique needs of different regions across the country.
Editor: Fascinating insights, Dr. Dupont.As we look toward the conclusion of this budget examination, what key takeaways should our readers keep in mind regarding the relationship between the Senate and the government?
Dr. Dupont: Readers should recognize that this budget fight reflects broader tensions between local and national governance in france. It’s a critical moment that underscores the importance of localism,especially in economic policies.The more that local needs are at the forefront, the better equipped communities will be to face future challenges. This could set a precedent for greater autonomy and influence for local authorities in fiscal matters going forward.
Editor: Thank you so much for your valuable insights, Dr. Dupont. We appreciate your expertise as we follow these essential developments in France’s budgeting landscape.
Dr. Dupont: Thank you for having me! It’s a pleasure to discuss such critically important issues.